ISO AMT Calculator & Guide for Startup Employees – Estimate Your Alternative Minimum Tax

What Is AMT and Why It Matters for Startup Employees

The Alternative Minimum Tax (AMT) is a separate tax system created in 1969 to ensure that high-income individuals, especially those benefitting from large deductions or preferential tax treatements, still pay a minimum level of tax (See IRS Topic no. 566).

For startup employees, AMT often comes into play when exercising Incentive Stock Options (ISOs), which are a preferential tax treatment. Even if you don’t sell your shares, the IRS may treat the spread, or the phantom gain between your strike price and the company’s 409A Fair Market Value, as income. This can trigger AMT and lead to a substantial tax obligation, which is why it’s important to run the numbers before you exercise.

This calculator is designed specifically for startup employees, helping you quickly estimate your potential AMT based on your exercise activity and income. It uses the latest 2025 IRS data and does not collect personal information.

ISO AMT Calculator (Updated for 2024 & 2025 Tax Years)

Key Features

• Built for ISO holders at venture-backed startups
• Estimates AMT impact using 409A FMV vs strike price
• No login or email required
• Updated for the 2025 tax year

Inputs you'll need:

• Shares Exercised – Number of ISOs you exercised this tax year
• Strike Price – The price you paid per share
• 409A Value (Fair Market Value) – Per-share value on the date of exercise
• Filing Status – Single, Married Filing Jointly, etc.
• Estimated Income – Your total taxable income for the year

👉 The calculator uses these inputs to estimate your spread and calculate your tentative AMT compared to your regular tax.

Formula: (FMV – Strike Price) × Shares = AMT Income

For questions regarding this AMT Calculator, please feel free to email: jordan@esofund.com

What do my results mean?

If your AMT is higher than your regular tax:

That means you could owe extra taxes just for exercising your ISOs, even if you haven’t sold your shares yet. This typically happens when your company’s current fair market value (FMV) is much higher than your strike price. The IRS sees that spread as “phantom income” and taxes it under AMT rules.

If your AMT is about the same (or lower) than your regular tax:

You may not owe anything extra right now.

How the ISO AMT Calculator works:

1. Begins with Total Income
2. Subtracts the Standard Deduction
3. Calculates Regular Federal Income Tax based on the value from #2 and your state/filing status
4. Calculates ISO Spread from the number of options, strike price, and FMV
5. Adds ISO Spread to Total Income to arrive at Alternative Minimum Tax Income (AMTI)
6. Subtracts AMT Exemption ($88,100 for individuals in 2025)
7. Calculates AMT based on #6 and your state/filing status
8. If AMT (#7) is greater than Regular Federal Income Tax (#3) then AMT Owed = AMT-Regular Income Tax. If not, you may not owe any AMT!

Example Scenario

A startup employee exercises 10,000 ISOs at a $1 strike price while the 409A value is $6.

• Taxable spread: ($6 – $1) × 10,000 = $50,000
• The employee's regular tax may be unchanged, but their tentative AMT increases based on this $50,000.

If their total income is $180,000, they may owe $4,000–$6,000 in AMT, depending on deductions and exemptions.

What should I do next?

1. ‍Talk to a tax advisor: This calculator is a great starting point, but a professional can help you map out your full tax picture: especially if you’re thinking about exercising a large number of options. Alternately, TurboTax is fully capable of handling AMT from an ISO exercise.‍
2. Consider exercising in smaller chunks: Exercising some options now (instead of all at once) can help spread out your tax impact across multiple years and possibly avoid AMT altogether. Check out our page on exercising just enough ISOs to avoid AMT.‍
3. Explore non-recourse funding: If exercising is too expensive, or too risky, firms like ESO Fund can help cover the cost without you paying out of pocket. We take on the risk so you don’t have to.

How ESO Fund Can Help With Your AMT

If your estimated AMT bill is too steep to cover out of pocket, ESO Fund can help. We fund ISO exercises and cover AMT risk-free in exchange for a portion of equity. Contact us below to learn more!

Want to understand your options more clearly?

• Read our Startup Equity Guide
• Learn how ESO Fund can help with funding your exercise
• Or contact us using the form below for a free equity assessment

Written by Jordan Long, Marketing Lead at ESO Fund